- 21 Oct
An RPO Debtor Has Rejected An Assignment Letter Clause
A recruitment sector RPO debtor has apparently rejected part of a GNA or General Notice Of Assignment letter. This is a worrying development for recruitment sector financing.
A "GNA" is a letter from an invoice finance user, to their customers, informing them of the invoice finance arrangement, specifically the "assignment of the book debts".
Assignment is the process underpinning factoring and invoice discount, whereby a supplier "assigns" all the rights to a sales invoice (including the right to get paid) to a funder in return for a prepayment against the invoice. It is the legal framework that underpins the receivables financing sector.
GNA - General Notice Of Assignment Letters
In the case of a disclosed facility, one where the customers know of the funders involvement, the GNAs are sent to each customer at the outset of the arrangement. Those letters will disclose the funders involvement and set out that payment must be made to the funder, without any offset, in order to discharge the debts. A similar "assignment clause" is typically displayed on all sales invoices.
With a confidential facility, the invoices bear no notice of assignment, but GNA letters are typically still produced and held by the funder, in case they need to "disclose" e.g. if the client were to breach the facility.
RPO Rejects GNA - Offset Clause
We have just heard from one of our industry contacts that one RPO debtor (an umbrella purchasing organisation operating in the recruitment sector) has advised that they will not accept the part of the letter that states that there must be no offset.
No Offset Clause
"Offset" is when the customer short pays a sales invoice due to an offset against something else. Typically this may be a contra account (an outsanding account for purchase invoices in respect of supplies), or payments made to the supplier (the funder's client) rather than the funder, or payments made to another third party. This throw up a number of complications, Invoices could be short paid due to:
- A contra balance, for supply, being offset against the sales invoice value.
- A payment being made to the funder's client in error.
- A payment being made to another third party in error.
This could have a serious effect on the receivables financing sector's ability to fund against such invoices, although it is not yet known how widespread this amendment is going to be. It adds yet another complication to funding recruitment sector invoices to RPO debtors, and could lead to stricter concentration limits against sales to such customers.
We have had a number of successes finding customers funding against RPO invoices, so please contact Sean on 03330 113622 if you are having issues getting your RPO invoices financed.